Marijuana Entrepreneurs Face Excessive High Tax Rates Due to Old Laws

Recent state mandates have allowed passage of medical marijuana in certain states. But due to a a decades-old lay set up to thwart drug runner, medical marijuana company are fasting tax rates as high as 75 percent.

The high tax rate has been an effective means by the government to fight drug traffickers and smugglers but the drug has no elasticity for dealing with the medical marijuana industry. Due to the drug, workers in the “green industry” can not pay for typical office expenses such as rent or payroll services.

Entrepreneurs whose businesses are legal under state laws are getting hammered in taxes by outdated federal rules.

“If you have a license from the state hanging on your wall, that doesn’t fit the definition of trafficking,” Jim Marty, an accountant in Colorado specializing in medicinal marijuana tax law said. “Yet the IRS is aggressively auditing this industry.”

He said he often sees clients facing effective tax bills of 65 percent to 75 percent. That compares to 15 percent to 30 percent for businesses in general.

The Internal Revenue Service did not respond to a request for comment.